Recent reporting from the International Wood Markets Group based in Vancouver, Canada shows that Southern Hemisphere sawmilling costs are the highest in the world. The report shows that with relatively competitive log costs in Q1 2015, assessed average EBITDA was lower than that for mills in North America and marginally higher than that for mills in Europe. In the case of competition with the latter region however, the Southern Hemisphere’s average sawmill costs were one-third higher than those in Europe.
The chart below, from the summary report which is available to FWPA members, shows the average cost and margins for Q1 2015.
In the context of rising imports into Australia of European sawn softwood, the lower average log prices and lower operating costs of the European sawmills provide some of the reason why even with a depreciated Australian Dollar, imports have grown.
Looking at other aspects of the report and its emphasis on 2014, the US economic recovery, such as it has been, had not flowed through to the production of logs, with log prices remaining cheap, even as lumber prices improved, increasing the profitability of mills. As the summary report itself describes about 2014:
“While the North American economy has been improving, boosting lumber demand and prices; the European economy continued to languish in 2014 and many mills (and countries) have struggled to stay profitable.”
The chart from the report shows that global structural lumber prices declined in all key markets across 2014 and early 2015, at least when measured on a US Dollar basis, leading to the conclusion that:
“…changes in log costs and currency exchange rates have changed the degree by which various regions are competitive relative to one another.”
In 2014 and early 2015, while US operating costs were lower due to cheap log costs, those in Canada rose, in part because of challenges associated with the much-discussed beetle damage.
The chart below shows this experience.
Again, the chart shows perfectly that other than China, European delivered logs are the highest priced in the world and would have been higher had it not been for the decline of the Russian Ruble in 2014 and 2015. Other Baltic states continue to operate – as data regularly reported in Statistics Count shows – at lower costs, delivering logs with a modest competitive advantage over the Western European prices.
The summary report also details China’s peculiar circumstances with it operating on the world’s highest average log costs and also the lowest average sawmill costs.
The Wood Markets Group has made a special summary of its Global Timber/Sawmill/Lumber/Sawnwood Cost Benchmarking Report (2014 and Q1 2015) available to FWPA members.
FWPA members can request a copy of the Summary Report by sending an email to jim.houghton@fwpa.com.au.
Wood Markets is also offering a Global Benchmarking Summary Report at a Special, Discounted Price. This Global Summary Report (approx. 32 pages) provides global log and sawmill data for both “Average” and “Top-Quartile” sawmills that compares combinations of 13 countries or regions (originating from the 29 countries or regions that are profiled in the Full Report). This summary report features many global summary graphs and offers global perspectives, just not at the level of detail contained in the Full Report.
The Global Summary Report is offered at a special price of US$2,450 – contact Wood Markets for a Table of Contents and examples of what is included. IWM can apply the full value of the Summary Report to the Full Report should you want to upgrade.
If you have any advance questions on the contents or the format of the 2015 Global Benchmarking Full Report or the Summary Report, please feel to contact Russ Taylor at retaylor@woodmarkets.com or +1-604-801-5996. Further details, including the basic benchmarking brochure, are posted on Wood Markets’ website athttps://www.woodmarkets.com/publication/global-cost-benchmarking/
